Granular Corporate Hedging Under Dominant Currency

Laura Alfaro, Mauricio Calani and Liliana Varela

No 2315, Discussion Papers from Centre for Macroeconomics (CFM)

Abstract: This paper shows that, in a world dominated by vehicle currencies, firms engaging in international operations retain currency risk and hedge it real and financially. We employ a unique dataset covering the universe of trade credit, international trade, foreign currency debt, and FX derivatives contracts with firms’ census data in Chile (2005-2018). We document that operational hedging is quantitatively limited, as different maturity, frequency, and amount of FX operations make it difficult to net these exposures. The granular firms complement real hedging using FX financial instruments, which improve their cash flow management and promote their trade and growth.

Keywords: Operational Hedging; FX hedging; FX derivatives; cash flow; foreign currency debt; currency mismatch; trade credit; dominant currency (search for similar items in EconPapers)
JEL-codes: F14 F2 F31 F38 F4 G30 (search for similar items in EconPapers)
Pages: 79 pages
Date: 2023-02
New Economics Papers: this item is included in nep-ifn, nep-opm and nep-rmg
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Related works:
Working Paper: Granular Corporate Hedging Under Dominant Currency (2021)
Working Paper: Granular Corporate Hedging Under Dominant Currency (2021)
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Persistent link: https://EconPapers.repec.org/RePEc:cfm:wpaper:2315

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